The proposed all-share deal would push Deutsche Wohnen closer to the top five European real estate firms by market value by growing its portfolio in Berlin’s booming rental market, where it is tapping increasing interest from international investors.

“We consider the business combination as a convincing opportunity to pool the strengths of the two companies,” GSW said in a statement.

“The Management Board and the Supervisory Board consider the exchange ratio of … shares … as fair from a financial point of view,” it said, adding that investment bank Goldman Sachs had agreed to that assessment in a so-called “fairness opinion”.

Both companies are also trying to persuade investors into accepting the offer of 51 Deutsche Wohnen shares for every 20 shares in GSW, which runs until midnight on October 30, by promising to raise dividends from 2015.

The payout ratio would rise to about 60 percent of funds from operations (FFO) from 50 percent, starting with the dividend to be paid for next year, the companies said.

The enlarged group, which already has antitrust clearance for the combination, would continue its growth strategy in Berlin and would also seek access to other dynamic regions, GSW said, without being more specific.

The acquisition could be completed before the end of the year if enough shareholders tender their shares, Deutsche Wohnen said and would be Germany’s second-biggest residential real estate deal since Whitehall bought LEG Immobilien for 3.4 billion euros in 2008.

The tie-up would increase Deutsche Wohnen’s portfolio of flats by around 63 percent to more than 147,000, pushing it into second place behind market leader Deutsche Annington with 179,000 apartments.

The all-share deal would push an enlarged Deutsche Wohnen closer to the top five European real estate firms by market value, such as British Land (BLND.L: Quote, Profile, Research) and domestic rival Land Securities (LAND.L: Quote, Profile, Research), giving it easier access to funding from investors across the continent.

Deutsche Wohnen said on Tuesday it plans to finance the bid for GSW by issuing as many as 135 million new shares, more than four-fifths of its existing share capital.

Deutsche Wohnen said it would offer 51 of its shares for every 20 shares in GSW, which would give GSW investors a stake of around 43 percent in the enlarged company.

The offer represents a 15 percent premium to GSW’s three-month volume-weighted average share price and the company’s net asset value (NAV), making it more expensive than other recent residential real estate deals.

Patrizia Immobilien (P1ZGn.DE: Quote, Profile, Research) paid a 7 percent discount to NAV when it bought most of GBW in April and property firms LEG Immobilien and Deutsche Annington (ANNGn.DE: Quote, Profile, Research) both joined the stock market at a discount this year.

Still, analysts said GSW was worth the price for Deutsche Wohnen because 72 percent of its portfolio would be in Berlin following the takeover, up from 54 percent, bringing economies of scale.

Some 85 percent of Berlin’s population rents rather than owns – compared with a nationwide ownership rate of 46 percent – making it an attractive investment for landlords, Close Brothers Seydler analyst Manuel Martin said.

GSW, whose chairman and chief executive were forced out by a shareholder rebellion last month, said it would study the offer before deciding how to proceed.

The ouster of the two executives followed a campaign led by Dutch pension fund PGGM, which said Chief Executive Bernd Kottmann lacked experience in managing residential real estate.

SURGING RENTS

In a sign that European property is beginning to attract investors after a downturn that hammered property values, Blackstone (BX.N: Quote, Profile, Research) – one of the world’s biggest private equity firms – is seeking to raise up to $5 billion for a new fund, a source familiar with the matter said.

Last week, data showed the euro zone was emerging from a 1-1/2 year recession, with the economies of both Germany and France expanding faster than expected.

The GSW deal would increase Deutsche Wohnen’s portfolio of flats by around 63 percent to more than 147,000 and give it a 6.5 percent share of Berlin’s rental market. Rents in the capital surged 40 percent between 2007 and 2012, according to research institute Empirica.

It would also push Deutsche Wohnen into the No.2 spot in Germany behind Deutsche Annington (ANNGn.DE: Quote, Profile, Research), the country’s largest real estate firm with 179,000 apartments.

Shares in GSW were up 6.3 percent at 33.44 euros at 1517 GMT, while Deutsche Wohnen was down 4.7 percent at 13.495 euros.

Deutsche Wohnen, which has net debt of 3 billion euros, would take on 1.8 billion in debt from GSW.

Deutsche Wohnen needs support for the deal from 75 percent of GSW’s shareholders, which it expects to get because two-fifths of GSW shareholders also own shares in Deutsche Wohnen.

Deutsche Wohnen also has to get backing for the capital increase from its shareholders at an extraordinary general meeting on September 30.

Deutsche Wohnen plans to fund the bid, which would be the second-biggest residential real estate deal in Germany in the past five years, by issuing 135 million new shares.

The group said on Tuesday it would offer 51 of its shares for every 20 shares in GSW, which would give GSW investors around 43 percent of the enlarged company.

Deutsche Wohnen said the offer represented a premium of 15.4 percent over the volume-weighted average share price of GSW over the past three months.

GSW said it would study the offer before deciding how to proceed.

In a sign that the European market is becoming attractive after years of crisis that hammered property values, sources told Reuters on Monday that the real estate arm of Blackstone (BX.N: Quote, Profile, Research, Stock Buzz), one of the world’s biggest hedge fund investors, was targeting up to $5 billion for a new fund that would invest in the region.

Last week, second-quarter growth data showed the euro zone was emerging from a 1-1/2 year recession, with the economies of both Germany and France expanding faster than expected.

The deal would bring Deutsche Wohnen’s portfolio of flats to 147,000, with 108,000 of these in Berlin, where rents surged 40 percent between 2007 and 2012, according to research institute Empirica. Deutsche Annington (ANNGn.DE: Quote, Profile, Research, Stock Buzz), Germany’s largest real estate firm, has 179,000 apartments.

“The offer is attractive at current share prices and the combination makes sense as Deutsche Wohnen is the company best placed to benefit from a Berlin-based portfolio,” said Georg Kanders, an analyst at Bankhaus Lampe.

Shares in GSW were up 7.9 percent at 33.94 euros at 0634 ET, while Deutsche Wohnen stock was trading 3.5 percent lower at 13.67 euros.

The bid comes at a time of upheaval in the top ranks of GSW. Just a few weeks ago the firm’s chief executive and supervisory board chairman were forced to step down. The departures came after a shareholder revolt spearheaded by Dutch pension fund PGGM.

Despite GSW’s troubles, the company trades at higher multiples than its suitor.

GSW’s enterprise value is 21.1 times its earnings before interest, taxes, depreciation and amortization (EBITDA), compared with 18.9 times for Deutsche Wohnen, according to Thomson Reuters StarMine.

Under the proposed deal Deutsche Wohnen, which has net debt of 3 billion euros, would take on 1.8 billion euros in net debt from GSW.

Deutsche Wohnen said the deal is contingent upon receiving a minimum 75 percent acceptance level among GSW’s shareholders and backing from its own shareholders for the capital increase at an extraordinary general meeting on September 30.

It expects roughly 25 million euros in annual savings after the integration is complete.

FRANKFURT, June 13 (Reuters) – Deutsche Annington, which is
planning a flotation worth over 1 billion euros ($1.33 billion),
aims to pay out a higher proportion of its earnings as a
dividend than its peers, according to a report from Morgan
Stanley.

The management of the German residential real estate company
plans to pay out 70 percent of its recurring earnings as a
dividend from the 2014 business year onwards, Morgan Stanley
analyst Bart Gysens said in the report, dated June 10.

Morgan Stanley and JP Morgan are managing the
listing.

A spokeswoman for Deutsche Annington, which with 180,000
flats is Germany’s largest residential real estate firm,
declined to comment on the report, saying that the company would
release information on the payout ratio at a later stage.

The payout would represent a higher proportion of earnings
than that handed to investors by its other listed peers.

LEG, which went public earlier this year, and GSW
Immobilien aim to hand out 65 percent of “Funds from
Operations 1″, while Deutsche Wohnen has a strategy to
pay out 50 percent.

Funds from operations is net income including depreciation
and amortization but excluding profits from divestments and is
considered the operating income of real estate companies.

Deutsche Annington’s payout ratio for 2013 will be in line
with its listed dividend-paying peers, before rising from 2014,
Gysens said.

The company said on June 10 it will float about a quarter of
the stock held by private equity owner Terra Firma,
and issue new shares worth 400 million euros, the proceeds of
which it will use to cut debt.

The fact that Terra Firma will likely remain a key
shareholder in the medium term could mean that Deutsche
Annington shares trade at a discount to peers, the Morgan
Stanley analyst said.

LEG Immobilien was the first German property company to
list its shares this year, raising 1.3 billion euros in January.

FRANKFURT, May 28 (Reuters) – Bilfinger shares
rose on Tuesday after the German firm said it would sell a
division that operates public-private partnerships, part of its
shift from construction-based projects to more predictable
industrial services and maintenance work.

The group’s shares rose 4 percent to 81 euros, their highest
level in almost seven weeks and topping Germany’s midcap index
after the announcement late on Monday.

“It’s not a business that’s relevant for the whole group and
exiting everything that’s risky makes investors happy,” said
Equinet analyst Ingbert Faust.

“The sale is a strategically good decision,” he said.

As with the sale of rival Hochtief’s airport unit,
buyers for Bilfinger’s Concessions unit could range from other
construction groups to infrastructure funds and financial
investors.

While the public-private partnerships of the Concessions
unit offer fee-based income from reliable partners like cities,
the division suffered after Bilfinger reduced its construction
unit that executed some of the orders. That led to lower
profitability and fewer capabilities, Bilfinger said on Tuesday.

“The sale is a consequence of the fact that we abandoned our
construction activities in so many countries,” a spokesman said.
“If you no longer have the synergies between the building
business and Concessions, why would you need such as solitary
unit that’s got little to do with the rest of the company?”

Bilfinger has mandated Rothschild to help with the sale and
is already in talks with parties interested in the business, the
spokesman added, declining to give more details.

The unit made earnings before interest, taxes and
amortisation (EBITA) of 41 million euros in 2012, thanks to a 52
million gain from the sale of projects to an infrastructure
fund, compared with group EBITA of 466 million euros.

The Concessions unit builds and operates roads in countries
including Canada and Britain, as well as a prison in Australia.

Brokerage Natixis raised its stance on Bilfinger shares to
“buy” from “neutral” and increased its price target to 86 euros
from 85 euros.

LONDON/FRANKFURT, May 21 (Reuters) – Britain’s dominant
cement makers could be forced to sell off plants to tackle a
lack of competition which regulators say has cost customers
hundreds of millions of pounds.

The Competition Commission (CC) said despite low demand in
recent years, producers have managed to raise prices and
profits.

“The established producers know too much about each other’s
businesses and have concentrated on retaining their respective
market shares rather than competing to the full,” said CC Deputy
Chairman Martin Cave.

Because the market was restricted to four players – Lafarge
Tarmac , Cemex, HeidelbergCement’s
Hanson and Hope Construction Materials – the lack of
competition cost customers at least 180 million pounds ($275
million) between 2007 and 2011, the CC said on Tuesday.

Cave said the CC’s findings did not mean the companies were
explicitly colluding or operating a cartel.

Lafarge, which co-owns Lafarge Tarmac with Anglo American,
and Cemex both said they believed effective competition existed
and that they would assist the CC in its investigation.

The CC said it might require one or more of the top three
producers to dispose of some plants or reduce their cement
production capacity.

It could also create a cement buying group to give smaller
customers more bargaining power or restrict the disclosure of
government and industry market data which have provided the
companies with a high level of understanding about each other.

The CC’s criticisms come as the cement industry battles weak
demand from the construction sector and follows a decade which
has seen the European Union and German authorities fine firms
such as Cemex and Lafarge for cartel activity.

The EU Commission has been investigating companies including
Lafarge, Holcim, Cemex and HeidelbergCement in 10 countries in
the European Union since 2008 for illegally setting prices,
restricting imports and market sharing.

HeidelbergCement, which owns British cement maker Hanson,
said it was cooperating with the CC but would not comment on the
findings before the final report, due by next January.

ESSEN, Germany, May 7 (Reuters) – Germany’s Hochtief AG
has agreed the 1.1 billion euros ($1.4 billion) sale
of its airports division, ending a lengthy quest for a buyer and
giving fresh impetus to a strategy rethink led by its CEO
appointed just six months ago.

The Essen-based group, controlled by Spain’s ACS
and which appointed Marcelino Fernandez Verdes as chief
executive in November, said it was raising its earnings targets
on the back of its exit from less profitable, capital-intensive
businesses.

Driven by relief over the end of more than three years of
unsuccessful attempts to divest the unit, Hochtief shares jumped
more than 5 percent, hitting their highest level since July
2011, compared with a 1.6 rise in the European construction
sector.

Verdes, a 58-year old former ACS manager, is leading a drive
to shed airports and real estate development businesses, aiming
to cut the company’s debt – which stood at 944 million euros at
the end of December, the last figures available – while making
it a leading global infrastructure provider.

It sold the airports unit to Canada’s Public Sector Pension
Investment Board. The division has holdings in airports in
Budapest, Duesseldorf, Hamburg, Sydney and Tirana. It also sold
Athens Airport as part of the transaction, even though it had
previously taken that hub out of the bundle, citing economic
troubles in Greece.

Hochtief had halted the sale early last year when it was
unable to fetch a price of 1.5 billion euros ($2 billion), but
later revived its efforts.

“The fact that the airport assets are going to be disposed
completely after such a long time is positive news and should
outweigh possible discussions on the pricing,” said DZ-Bank
analyst Marc Nettelbeck.

Verdes also aims to leave behind large and risky
construction projects that led to billions of euros of
writedowns and aims to reduce the size of projects and better
manage risks, he told Hochtief’s annual shareholders’ meeting.

“We have to put an end to nasty surprises like profit
warnings,” Verdes told the 591 investors present, representing
81 percent of Hochtief’s share capital. “Infrastructure is our
real expertise.”

STRATEGIC SHIFT

Posting first-quarter earnings above expectations, the group

also raised its earnings outlook for this year, saying it
expected earnings before tax to rise to as much as 680 million
euros in 2013, compared with 656 million predicted previously.

The group’s strategic shift, which also includes
strengthening its Australian mining unit Leighton and
building power plants such as offshore windmills, will take at
least two years, Verdes said.

Hochtief’s strategy contrasts with that of peer Bilfinger SE
, which is focusing on servicing buildings, power
stations and industrial plants, and managed to achieve a higher
profitability than Hochtief at the services unit.

Bilfinger generated an EBITA margin of 4.7 percent at its
building and facility services unit, compared with a pretax
profit margin of 2.7 percent at Hochtief.

The Mannheim, southern Germany-based competitor expects
orders for maintenance to be more stable than construction
projects, which hinge on the overall state of the economy, a
strategy that Hochtief also pursued until Verdes became CEO.

Bilfinger is sticking with that strategy as builders
struggle in the face of weak economic growth and sluggish
construction activity across Europe, with several announcing
writedowns, restructuring plans and job cuts.

Government spending cuts and tightening private sector
budgets in Europe have held back a recovery in construction
markets in the region, in contrast to the United States, which
is seeing signs of improvement.

Some shareholders therefore questioned Verdes’ strategy.

“Are you part of the solution or are you part of the
problem?,” asked Marc Tuengler of the DSW association of
shareholders.

But for now Verdes’ strategy is paying off and Hochtief
swung to a first-quarter net income of 43.5 million euros from a
loss of 34.8 million a year before, compared with a forecast
23.6 million.

Hochtief shares were up 6.1 percent at 56.65 euros by 1036
GMT, while ACS was up 6 percent at 21.075 euros.
($1 = 0.7659 euros)

(Additional reporting by Ludwig Burger in Frankfurt; Editing by
David Holmes)

FRANKFURT, April 17 (Reuters) – Deutsche Lufthansa
was threatened with a second round of strikes as labour union
Verdi, representing thousands of staff at the airline, rejected
as “unacceptable” an offer for wage increases from the company.

Lufthansa offered to raise salaries by 1.2 percent from
October this year and a further 0.5 percent a year later, in a
deal that would run for 29 months and would not contain job
guarantees, a spokeswoman for Verdi said on Wednesday.

“We will discuss the offer tomorrow and possibly decide …
if we’re going on strike again,” she said, noting passengers
would be informed in due course if the union was calling further
stoppages.

Lufthansa said it had offered to raise salaries in two steps
in a deal that would last from February this year to June 2015,
giving total increases of between 1.7 percent and 2.3 percent
depending on the division an employee worked in, said a
spokeswoman, declining to give more details.

Staff have already held a one-day strike on March 21,
forcing Lufthansa to cancel nearly 40 percent of its flights for
the day.

Efforts by big European airlines such as Lufthansa and Air
France-KLM to cut costs – in the face of soaring jet
fuel prices and fierce competition from Middle Eastern airlines
and low-cost carriers – have fanned tensions with workers.

Lufthansa, Europe’s biggest airline by revenue, wants to
freeze pay and get staff to work an hour more each week to help
it remain competitive.

The airline is cutting 3,500 jobs, revamping low-cost
carrier Germanwings and bundling procurement for its airlines as
it seeks to cut costs and improve earnings.

Last year it agreed to a mediated deal to raise cabin crew
pay almost 4 percent, adding 33 million euros to costs, after a
series of strikes forced it to cancel more than 1,000 flights.

Staff costs accounted for just over a fifth of its overall
operating expenses last year. That compares with a 30 percent
share at Air France, but budget carriers such as Ryanair
and easyJet have a much lower cost base.

The comparable figure for the latter two is closer to 10
percent, allowing them to undercut “legacy” or
longer-established carriers on fares.

FRANKFURT/LONDON, March 20 (Reuters) – German real estate
company IVG Immobilien is seeking to save the
investment fund that owns part of London’s landmark Gherkin
office block from potential liquidation, as financing banks
demand the 180 meter tower reduces its debt.

IVG, which reported an unexpected 100 million euro ($129
million) loss in 2012, burdened by its projects abroad, is
shifting a loan to finance the building from Swiss francs to
pounds in order to satisfy demands from the banks, a spokesman
said on Wednesday.

The valuation of the Gherkin has dropped to as little as 473
million pounds ($715 million) from the 600 million it was valued
at when IVG’s fund bought half of it in 2007, according to the
most recent prospectus of the closed-end fund called EuroSelect
14, as rental income did not meet expectations.

Rents in London’s financial district are dropping in some
areas and the vacancy rate was 7.3 percent in February versus
4.8 percent at the start of 2007, before the financial crisis,
according to property consultancy CBRE.

IVG’s investments outside Germany are a drag on
profitability and it said on March 5 that those investments were
partly responsible for the 100 million euro loss.

The group also did not pay a dividend for last year and
could not service a convertible bond.

A 40 percent rise in the franc against the British pound
since the Gherkin was financed in 2006 has led to a rise in
indebtedness, or the ratio of the loan to the value of the
building, to almost 100 percent, according to a statement on
IVG’s website.

MONEY BACK

Under the terms of the loan, banks have the right to ask for
their money back as soon as the ratio hits 67 percent and have
therefore asked for the loan to be shifted to pounds to reduce
the currency risk, said the spokesman.

IVG is also trying to find an investor for the building by
the end of the year as part of the banks’ demands. The company
and the banks will at that time convene again to discuss the
investment, said the spokesman.

He declined to name the five German banks.

Finding an investors might turn out to be difficult, as the
some 9,000 private investors in the fund would have to agree to
the new stakeholder, which would reduce the value of their
holdings, after their initial agreement to the start of the
search.

Fifty percent owner Evans Randall also has to agree to the
new investor, said the spokesman. Evans Randall declined to
comment.

“We’re expecting to find a holistic solution by the end of
the year,” said the IVG spokesman. “Finding an investor is an
ambitious target,” he said, declining to detail any alternative
solutions.

Bonn-based IVG has been negotiating with the banks since
2009 when indebtedness, also called the loan to value ratio,
rose to above 67 percent.
($1 = 0.7760 euros)
($1 = 0.6615 British pounds)

FRANKFURT, March 14 (Reuters) – Germany’s HeidelbergCement
forecast a big rise in pretax profit this year,
boosted by a deal to increase its stake in an Australian cement
venture that will help it to meet growing demand from Asia.

Shares in the company rose over 4 percent on Thursday, after
it said it had agreed to buy a 25 percent stake in Cement
Australia from Swiss rival Holcim for an undisclosed
price, giving the two firms equal 50-percent ownership.

Rising demand from North America and Africa would also boost
earnings, HeidelbergCement said, forecasting a “moderate”
increase in operating profit, a “significant” rise in pretax
profit and higher net income this year, without elaborating.

The company said on Feb. 7 it expected to be able to raise
prices this year following a pick-up in demand in some of its
markets including Ghana, the north-American west coast and
Indonesia.

AUSTRALIAN EXPANSION

HeidelbergCement’s expansion in Australia gives it a bigger
share of a business which had sales of A$1 billion ($1 billion)
in 2012. Cement Australia owns two cement factories, as well as
a crushing mill, and is building a second crushing mill.

Holcim and HeidelbergCement will jointly manage the venture.

HeidelbergCement buys around 40 percent of the cement from
Cement Australia, as much as Holcim, and holding stakes of the
same size would eliminate conflicts about the price of the
cement, HeidelbergCement Chief Financial Officer Lorenz Naeger
said at a press conference.

The German firm, which is cutting debt in a bid to win back
an investment grade credit rating, said its net debt had fallen
to 7 billion euros at the end of December, 800 million euros
less than three months before and less than half of what it was
at the end of 2007 after the takeover of British peer Hanson.

HeidelbergCement said in February it aimed to accelerate a
cost-cutting programme to save an extra 150 million euros this
year, bringing its target for cutting annual costs over the
three years ending 2013 to 1 billion euros.

The company is aiming for net debt of 6.5 billion euros in
the medium term in order to keep it at a level that would be
manageable even in the case of another economic crisis, Chief
Executive Bernd Scheifele said.

Scheifele did not detail when he expects to reach that
target, but said it would not be this year.

HeidelbergCement plans to propose a dividend of 0.47 cents a
share for its 2012 financial year, up from 0.35 cents the year
before.